The SEC Talks About Reforming Market Mechanisms

“In addition to time out mechanisms, we will consider any other steps that potentially could prevent or help minimize the harm that occurred on May 6. These include: (1) exchange-level erroneous order filters; (2) “collars” on the prices at which market orders or aggressively priced limit orders can be executed; (3) limitations on the size of market orders or aggressively priced limit orders; and (4) eliminating the practice of displaying stub quotes that were never intended to be executed.”
So that’s a total of 5 prospective improvements to be made, 4 of which I discussed here already. 0)Time out mechanism: NYSE’s LRP already exists, 1) preventing aberrant trades before they happen, 2) individual stock trading curbs, 3) limit the size of market orders – to ZERO! 
I didn’t discuss her point number 4:  “stub” orders, and I don’t think that would make a difference.  If you do the other 4 things, “stub” orders become irrelevant.  By the way – a “stub” order is a boundary “place holder” type of quote, like a 1c bid, or a $999,999 offer.  Schapiro seems to think that if there was no 1c bid, then the 1c trades couldn’t have taken place.  That may or may not be true, but again, will be made irrelevant if the other improvements are made.
-KD

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